Environment Editor, The Sydney Morning Herald

Some time on Thursday, Mackay Sugar will flick the switch on its new $120 million co-generation plant and start supplying electricity to Queensland's regional power grid.

The country's second-biggest sugar miller plans to ramp up output, and by February it should be supplying almost a third of the electricity in the Mackay region, as well as powering its Racecourse Mill and adjacent refinery.

The plant will incinerate fibre left after crushing sugar cane, known as bagasse. Its power exports - expected to run 50 weeks a year - will reduce the region's coal-fired carbon dioxide emissions by about 200,000 tonnes a year, while earning the company renewable energy certificates and payment for the electricity itself.

"We anticipate a payback over approximately seven years," the company's business development manager, John Hodgson, said.

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"We expect that this project will remove Mackay Sugar from the list of Australia's top carbon emitters" required to pay the carbon tax, he said.

The chief executive of the industry lobby group the Energy Efficiency Council, Rob Murray-Leach, said Australian companies are catching on that investments to improve energy productivity can deliver economic and environmental benefits.

Comments made at the recent Senate inquiry into electricity prices suggest politicians from all sides "are starting to understand that energy efficiency is the urgent and the easy way to deal with rising energy prices and carbon emissions," Mr Murray-Leach said.

Energy efficiency is fast becoming the new black if Australia's energy white paper released last week and the unveiling of the International Energy Agency's world energy outlook report on Monday are any guide.

“In the nation’s pursuit of energy affordability, climate change mitigation and energy security, energy productivity stands out as perhaps the single most cost-effective way to achieve these goals,” is how the government’s landmark energy report described it.

While the paper did not go as far as the IEA and identify efficiency as an energy source, it represented a “big jump forward” from previous assessments including the draft version of the white paper released a year ago, Mr Murray-Leach said.

The IEA report identifies investments to get more from the same amount of energy. Actions such as mandating higher minimum fuel economy standards and spending on new lighting and heating equipment will account for 70 per cent of energy savings between now and 2035. By contrast, switching fuels such as to renewable energy, will supply only 12 per cent, the IEA said.

To be sure, the necessary investments won’t come cheap. Globally, they will cost $US11.8 trillion by 2035 - but they will generate savings of some $US23.4 trillion, the agency predicts.

The EEC’s Mr Murray-Leach said governments should step up to make efficiency efforts attractive, including by enabling companies and households to be paid by energy companies for savings they make, or so-called “negawatts”.

As companies such as Mackay Sugar demand less power from coal-fired power plants, energy suppliers can avoid making new investment in long-lived assets that are likely to become stranded, Mr Murray-Leach said.